Paul Krugman wins Nobel Prize

This morning I woke up and was listening to Bloomberg Radio in bed when I heard Robert Shiller and John Ryding talking about about Paul Krugman. I quickly realized he was the Nobel Laureate in Economics for this year. Krugman, the Princeton Professor, is much better known for his leftist politics today than for his academic work. But, he had a long history of academic study behind him before he became the sometimes-controversial NY Times columnist we know today.

Congratulations to him.

Princeton University professor and New York Times columnist Paul Krugman won the Nobel Prize in economics for his work on trade theory.

Krugman, 55, received the prize “for his analysis of trade patterns and location of economic activity,” said the Royal Swedish Academy of Sciences, which selects the winners. His work explained how economies of scale influence trade and urbanization.

“It’s a total surprise,” Krugman said in a telephone interview.

Krugman gained his reputation in economics by contributing to strategic trade theory, contending that countries could steal a march on other nations by subsidizing strategic industries. He has found broader fame with his newspaper columns that regularly criticize President George W. Bush’s policies.

In an interview with Bloomberg Television on Oct. 10, Krugman said the current financial turmoil had similarities with the Great Depression. “The parallels are stronger than I thought they would be,” he said. “We developed a financial system that is out of control. The only things people want to buy are T-bills and water.”

The Nobel laureate said today he saw little danger of a move toward protectionism in the U.S., no matter which party wins in next month’s elections.

Protectionism

“There may be a standstill, or slowdown at least, on new trade agreements, but I find reversal on trade agreements implausible,” he said in remarks via telephone to a group of reporters in Stockholm. “Full-scale protectionism I don’t see.”

He has argued the benefits of subsidies are generally marginal. He has also been praised for his work on the development of industrial clusters and his equations on the impact of economic shocks on the current account, exchange rates and capital flows.

In 1991, he was awarded the John Bates Clark Medal by the American Economic Association, which is awarded to the best economist under the age of 40.

Krugman was born in Long Island and studied economics at Yale University. He obtained a Ph.D. from the Massachusetts Institute of Technology in 1977 before joining Princeton University. From 1982 to 1983 he served on the White House Council of Economic Advisers, during the presidency of Ronald Reagan. He has published a series of books and his ability to turn complicated economic theory into understandable prose led to him write an opinion column for the New York Times for the past eight years.

Previous Winners

Alfred Nobel, the Swede who invented dynamite, in his will in 1896 established awards for achievements in physics, chemistry, medicine, peace and literature. The economics prize was set up by Sweden’s central bank in 1968. Former winners include Milton Friedman, Amartya Sen and Friedrich August von Hayek.

The award’s official name is “The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel.” The prize consists of 10 million Swedish kronor ($1.41 million), a gold medal and a diploma.
–Bloomberg News